Microsoft Corporation Gets Into The Weed Business

Microsoft is surely getting hip: first social media, and now marijuana. Earlier this week, the tech firm acquired LinkedIn in a record deal of $26 billion, and now, it has announced its maiden venture in the world of marijuana.

Microsoft makes a bold move

Microsoft has entered into a partnership with KIND Financial to provide state and local governments with seed-to-sale software for better management of cannabis commerce and distribution, reports The New York Times. With this deal, the company has become the first major tech firm (and the first major publicly traded firm) to acknowledge the legalization of marijuana.

“This is an entirely new field for us,” said Microsoft’s executive director of state and local government solutions – Kimberly Nelson. “We would have to figure out which conference might be the premier conference in this space. That’s not outside the realm of possibility.”

KIND Financial will use Microsoft’s technology to offer services to government agencies. A Microsoft team will help clients comply with the regulations and laws and help prevent the product from heading to the black market, according to Marijuana.com.

Marijuana still a controversial area to associate with

Though major brands are still mum on this controversial topic, several have started to show their support for it. In May, Walgreens Boots Alliance released research detailing the benefits of medical marijuana, which is now permitted in 24 states. The drug is already legalized for recreational use in Washington State, Washington D.C., Colorado, Oregon and Alaska and will soon be up for a vote in several more states, including California.

In the coming years, the legal marijuana industry is expected to grow rapidly with sales forecast to total around $6.7 billion this year versus $5.4 billion a year ago, according to ArcView Market Research.

It must be noted that at the federal level, marijuana is still illegal, so federally-insured banks are hesitant to finance companies involved in the trade, thus jeopardizing the growth of the industry. Also several states do not have laws for the medical use of marijuana. In May, Nasdaq blocked the listing of MassRoots, saying this industry-specific social network could be seen as “aiding and abetting the distribution of an illegal substance.”

Nevertheless, Microsoft’s support for marijuana could do wonders for the industry. Matthew A. Karnes, head of a company providing data on the marijuana business, told The New York Times that it’s “very telling that a company of this caliber is taking the risk of coming out” and working with a marijuana business. Karnes expects more partnerships going forward.

“We do think there will be significant growth,” said Nelson. “As the industry is regulated, there will be more transactions, and we believe there will be more sophisticated requirements and tools down the road.”

At 10:02 a.m. Eastern today, Microsoft shares were down 0.65% at $50.06. Year to date, the stock is down by over 11%, while in the last year, it is up almost 9%.

Author: Aman JainAman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com